Where the money goes at hospital giant Cedars Sinai.

For most patients, the only concern is whether a hospital can deliver fast, affordable treatment in times of trouble.

But there is a great deal more to running a hospital than that. In fact, the day-to-day management of a hospital is a business challenge verging on the monumental, health care officials say, and one that has only increased in the era of managed care.

Cedars Sinai Medical Center, located on the border between Los Angeles and Beverly Hills, is one example of a hospital that's trying to meet the challenge.

With the size and services typical of a county facility, and the funding worries of a private hospital, it must leap the management and financial hurdles of both realms.

Founded in 1961 when two smaller regional hospitals merged, Cedars last year saw more than 208,000 inpatient days and 155,00 outpatient visits, in departments ranging from ambulatory care to AIDS treatment.

Gross revenues for 1995 topped $1.2 billion, coming from a range of sources including the patients who pay cash for treatment - a rare breed - to those relying on government Medicaid payments for the indigent.

At the end of the day, running a hospital is a business. As such, accounts receivable and reasonably priced supplies matter more to the hospital's well-being than the most innovative life-saving technology.

"One of things unique about hospitals is that they have both high labor costs and high capital costs," said Cedars Sinai President and CEO Tom Prizlack. "In most other businesses you'll find one or the other."

Labor typically represents 60 percent of Cedars' total operating expenses, Prizlack said, with the bulk of that going to the hospital's 642 staff physicians. The hospital employs 4,800 full-time staff, making it the largest private, non-profit hospital in the Western United States.

"Ten years ago, the dominant mode was for hospital physicians to come from single practices, or ones with two to three partners," Prizlack said. With recent consolidation among physician groups, he said, doctors at Cedars now come from groups ranging in size from one to 60 partners.

Unlike nurses, technicians or support staff, physicians are not contracted directly by Cedars. Instead, they come from dozens of different physician groups, and once at Cedars function as an alliance.

California hospitals are prohibited from directly employing physicians in medical positions, under the notion that as employees, doctors could feel undue pressure from management to save money by skimping on treatment.

After staffing, the single largest expense at Cedars and other Los Angeles hospitals is supplies, ranging from pharmaceuticals to disposable bandages.

Cedars last year spent more than $111 million on such goods, about 20 percent of its expense budget. That figure is in tune with the average spent by other local hospitals on supplies, according to Jim Barber, president of the Healthcare Association of Southern California.

Cedars' debt on construction costs and depreciation on buildings and capital equipment comes in next, at $43 million, or 7 percent of the expense budget, in 1994.

Finally, malpractice insurance, marketing, and ancillary services such as laundry, housekeeping and cafeteria operations account for nearly all of the remainder of Cedars' and other hospitals' expenses, Prizlack and Barber said.

While hospital expenses have not changed radically in the past 10 years, revenue sources have.

In years past, most income for public and private hospitals came from indemnity health insurance, in which the insurer paid for all expenses after the, patient covered a deductible.

With indemnity's rapid replacement by tighter-fisted managed care programs, Cedars, like hospitals throughout the county, has shifted much of its focus to less-costly outpatient treatment.

"We're involved in that transition on virtually every front," Prizlack said. "We've reduced the number of inpatient beds in operation, and expanded all of our clinical services from diagnostics to ambulatory surgery volume."

For the patients who do check in, the average length of stay has dropped 16 percent in the last four years, from just over six days in 1991 to five days last year. By reducing the number of beds from a high of 1,120 in 1976 to 883 beds today, Cedars has bumped its occupancy rate to 52 percent, from a low of 48 percent in 1992.

Because inpatient treatment remains the most profitable type of care - and because the largest category of inpatients is the elderly - Medicare is Cedars' single largest source of income.

Last year, the federally funded health insurance program paid Cedars $546 million - making up 43 percent of the hospital's total gross revenue. That's a shade higher than the 40 percent average at most hospitals, the Healthcare Association's Barber said.

Daily and capitated reimbursements from managed care groups follow next on the income side, kicking in 30 to 40 percent of insured patients' payments at Cedars. (Capitation is when an HMO or other managed care group pays a hospital a monthly fee for each of the HMO's patient-members.)

And trailing that is government-funded Medicaid payments for the very poor, which accounted for just under 9 percent of the hospital's 1995 payments.

Billing all that money is one thing; collecting it is something else.

"It has become more complex in the managed-care era than it was before," Prizlack said. "There's multiple contracts, multiple payers, different terms with each of those arrangements." Some managed care groups have a standard policy of questioning every bill received above a certain amount, he said, leading to delays in payment that can stretch out for months.

Last year, Cedars took a $93 million hit in uncompensated care costs.

Because Cedars is not-for-profit and receives philanthropic support from two associated foundations, part of that write-off was offset by donations. But more typically, philanthropy goes to capital investments such as a recent $8 million expansion of the hospital's emergency treatment center.

"One thing about health care is, it operates in a highly competitive environment, but is a highly regulated industry at the same time," Prizlack sighed. "Has it become more challenging over the last five years? I think the answer is yes."

But after all the hoops and hurdles, Cedars turned a 3 percent profit last year, money that will go back into the hospital's daily operations.